A comparative income statement is given below for McKenzie Sales, Ltd., of Toron

Question

A comparative income statement is given below for McKenzie Sales, Ltd., of Toronto McKenzie Sales, Ltd Comparative Income Statement This Year Last Year $7,300,000 $5,548,000 4,740,000 3,510,000 Sales Cost of goods sold Gross margin Selling and administrative expenses 2,560,000 2,038,000 Selling expenses 1,385,000 1,079,500 710,000 Administrative expenses Total expenses Net operating income 610,000 2,095,000 1,689,500 348,500 465,000 101,000 Interest expense 90,000 Net income before taxes S 364,000 258,500 Members of the company's board of directors are surprised to see that net income increased by only $105,500 when sales increased by $1,752,000 Required 1. Express each years income statement in common-size percentages. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) This Year Last Year Sales Cost of goods sold Gross margin Selling and administrative expenses 100.0 % 65.096 35.0 % 100.0 % 630 % 37.0 1% 19.00% 10.0 % 29.0 1% 6.0 % 1: 1% 5.0 % 190 % 11.00% 30.0 % 7.0 % 2.0 % 5.0 1% Selling expenses Administrative expenses Total selling and administrative expenses Net operating income Interest expense Net income before taxes

Explanation / Answer

This year Last year Sales 100.0% 100.0% Cost of goods sold 64.9% 63.3% Gross margin 35.1% 36.7% Selling and administrative expenses: Selling expenses 19.0% 19.5% Administrative expenses 9.7% 11.0% Total expenses 28.7% 30.5% Net operating income 6.4% 6.3% Interest expense 1.4% 1.6% Net income before taxes 5.0% 4.7%

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